India panicked over future oil supply went after international oil assets competing directly with China. Both China and India may be wrong in their approach, which will not solve their problem and may turn out a very costly experiment for both the countries.
According to international oil experts, the rationale for "security of supply" was redundant as no country could be immune from a significant disruption to global oil production.
The Japanese have tried to develop a 'security of supply' policy for decades, but it has not worked. Now the Chinese are developing one, but they will fail too, because the market is international where everybody is affected if prices go up.
India earmarked two multibillion-dollar energy deals with Iran and Russia yesterday, underlining its rivalry with China in the race to secure oil and gas supplies to fuel rapid economic growth.
In New Delhi, India and Iran signed a preliminary agreement - unofficially estimated to be worth $40bn - that committed India to importing liquefied natural gas and developing two Iranian oilfields and a gas field. Mani Shankar Aiyar, the Indian oil minister, said: "Every last detail has been settled, price too."
Separately, India's Oil and Natural Gas Corporation said it was in talks about investing in part of Yukos, the Russian oil group broken up in a state-backed auction last year. Officials from New Delhi's petroleum ministry told India's Business Standard newspaper that ONGC may soon place a $2bn bid for a stake in Yuganskneftegas, the main production unit of Yukos.
India's rapidly growing economy is hungry for energy and demand for oil is set to grow at an annual rate of at least 3.6 per cent during 2005-07. India imports about 70 per cent of its crude oil.
A bid by ONGC for a Yuganskneftegas stake could put it in competition with the Chinese National Petroleum Corporation, which Russian officials had earlier indicated was their preferred foreign partner for the assets.
The prospect of Chinese and Indian oil companies buying oil and gas-producing assets in the US and Russia is changing the landscape in which the western oil majors operate.
In a further sign of China's and India's aggressive pursuit of energy supplies, India yesterday signed a $40bn deal with Iran to import liquefied natural gas and join in developing three Iranian oilfields.
The deal follows reports that the China National Offshore Oil Corporation (CNOOC) is eyeing a $13bn takeover of Unocal, the US listed oil and gas producer, and that India's Oil and Natural Gas Corp was in talks with Russia about buying some of the assets of Yukos.
(9 January 2005)